Instagram testimony doesn’t add up

Facebook's Instagram account is a display of the company's daily antics at its office.

Instagram’s apparent rift with Twitter may be deeper than originally thought. The New York Times is reporting that Instagram CEO Kevin Systrom’s testimony to the California Corporations Department is inconsistent with the accounts of others close to the $1 billion deal.

In Systrom’s August testimony, he claimed that Instagram had no other official offers to purchase the photo-sharing social network. Details have since emerged about a $525 million offer from Twitter to buy Instagram just a few weeks before the Facebook deal went through.

While this latest revelation is an obvious problem for Systrom with the legal implications of lying under oath ranging from perjury to fraud, it is also another example of the tech industry’s lack of transparency that could shake future investors' confidence.

Nick Bilton for the New York Times broke the story yesterday:

Ivan V. Griswold, a lawyer for the state regulators, asked again: “Immediately before the negotiations, did you receive any offers from invest — .” Before he could finish his question, the transcripts show, Mr. Systrom cut him off.

“We never received any formal offers or term sheets,” Mr. Systrom said. “No.”

Yet the accounts of several people close to Twitter and Facebook, and documents reviewed by The New York Times, contradict the statements he made under oath. Mr. Systrom and Mike Krieger, the other founder of Instagram, held several meetings as late as March with top Twitter executives, according to people on both sides of the talks, who requested anonymity because the talks were private and because they were concerned about legal repercussions. These people said the sides had verbally agreed weeks earlier on a price for Instagram of $525 million in cash and Twitter shares.

Mr. Systrom told Twitter on March 20 that he and Mr. Krieger had thought about the offer and had decided to “remain independent.” Less than three weeks later, Twitter found out, along with the rest of the world, that Instagram had agreed to be acquired by Facebook in a $1 billion deal negotiated personally by Facebook’s chief executive, Mark Zuckerberg.

"A nonbinding document outlining the terms of a proposed acquisition" is NOT an offer. An "offer" has specific legal meaning. If you make an offer the terms are binding once someone accepts it. Systom knew what he was saying, because he discussed the exact phrase he would use with his lawyers.